ABRAHAM GULKOWITZabe@gulkowitz.com917-402-9039

2015 issue 9May 14, 2015

About Face…Another bout of volatility across global government bond markets helped fuel weakness for equities in the US and Europe and left the dollarstruggling against the euro, offering support to oil and gold prices. How serious? In trading conditions reminiscent of last week’s shakeupin German sovereign debt, the yield on the 10-year Bund rose into the 0.75 per cent range, but some way short of last week’s five-monthhighpoint of 0.80 per cent. For the moment, there is serious confusion on growth levers and their future trajectories. Recent statisticsemanating out of the EU have been stronger, and the ongoing stabilization in oil prices may have combined to significantly reduce concernscentered on deflationary pressures, despite lingering uncertainty about Greece. However, very weak statistics in the U.S. - for GDP, forretail sales – and also very weak data notifications in China may raise questions regarding the timing of Fed policy moves. All this leads toconflicting crosscurrents in economic directions and financial market bearings. Also complicating things even further is the awkwardsituation in the markets. The combination of high money liquidity (zero interest rate policies plus massive QE) and low trading liquidity (dueto heightened regulation and bank capital constraints) may be fostering market air pockets, intermittent mini shocks.

U.S. job growth regains some steam, keeping Fed rate hike on trackU.S. job growth rebounded last month andthe unemployment rate dropped to a nearseven-year low of 5.4 percent, signs of apick-up in economic momentum that couldkeep the Federal Reserve on track to hikeinterest rates this year.

China’s overall trade with the world slumped 10.9 per cent in April from a year earlier in the latest sign of the slowdown

Picasso painting sold for record $179mChristie’s sees record sales as art market continues to soar to new heights

German bond yields spiked again amid expectations that inflation may have bottomedout in the Eurozone, lifting the euro, while volatility in the regions’ bond marketspushed European stocks lower. German bond yields have surged in recent weeks asinvestors have become more confident inflation and growth will pick up in thecurrency-bloc. The sell-off has been exacerbated by investors unwilling to enter thebond market until the volatility shows signs of relenting.

Moody’s cuts Chicago’s debt rating to junk territory

U.S. retail sales have worsened their sluggish pace… Overall retail sales including foodservices & drinking places during April were little-changed (+0.9% y/y) following a 1.1% Marchincrease, revised from 0.9%.. Sales excluding autos gained 0.1% (-0.0% y/y) after a 0.7% advance,revised from 0.4%., also below expectations. During the last ten years, there has been a 92%correlation between the y/y change in retail sales and the change in real GDP. Sales in the retailcontrol group exclude autos, gasoline, building materials & food services and align with the consumerspending estimates in the GDP accounts.

Investors scramble to keep up as trends reverse

Dollar hits three-month low while equities and bonds turn choppy

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In This Issue

• Engines of GrowthConflicting economic signals emanating around the globe have confoundedinvestors and contributed to intermittent bouts of volatility, even in governmentbond markets. espite massive easing, most of the global economy faceswoefully inadequate growth prospects and difficult policy options. Very obviousfinancial vulnerabilities, and serious geopolitical concerns are aggravating theuncertainty. And let’s not forget that many of the challenges are not fleetingand cannot be resolved easily … (pg 10)

• Think it Through… (pg 11)

• Credit… (pg 12)

• A New Geography of Business… (pg 13)

• Pumping Iron … (pg 14)

• The DNA of Business… (pg 15)

• Real Estate and Construction… (pg 16)

• Construction… (pg 17)

• Will Life Ever be the Same? (pg 18)

• About Face…Another bout of volatility across global government bond markets helped fuelweakness for equities in the US and Europe and left the dollar strugglingagainst the euro, offering support to oil and gold prices. How serious? Intrading conditions reminiscent of last week’s shakeup in German sovereigndebt, the yield on the 10-year Bund rose into the 0.75 per cent range, butsome way short of last week’s five-month highpoint of 0.80 per cent. For themoment, there is serious confusion on growth levers and their futuretrajectories. Recent statistics emanating out of the EU have been stronger,and the ongoing stabilization in oil prices may have combined to significantlyreduce concerns centered on deflationary pressures, despite lingeringuncertainty about Greece. However, very weak statistics in the U.S. - forGDP, for retail sales – and also very weak data notifications in China mayraise questions regarding the timing of Fed policy moves. All this leads toconflicting crosscurrents in economic directions and financial market bearings.Also complicating things even further is the awkward situation in the markets.The combination of high money liquidity (zero interest rate policies plusmassive QE) and low trading liquidity (due to heightened regulation and bankcapital constraints) may be fostering market air pockets, intermittent minishocks.

(pg 1)

• In This Issue (pg 2)

• The Return to Normal… (pg 3)

• You Can’t Handle the Truth ! (pg 4)

• Market Roar… (pg 5)

• Households… (pg 6)

• Reference Points… (pg 7)

• Dislocation, Dislocation… (pg 8)

• The Likelihood of Unlikely Events... (pg 9)

Headlines and data appearing in The Punch Line came from widely available publications including national and international newspapers, trade journals, economic and industrial bulletins and news websites.

Contact information:

Abraham Gulkowitz

phone: 917-402-9039 email:   abe@gulkowitz.com

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The Return to Normal ?

Consumer caution could restrain US growth rebound

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May 14, 2015

YouCan’t Handle the Truth…Let's Take the “Con” out of Economics

A slump in euro-area government bondsgathered force on concern that deflationis less of a pressing concern.

Financial sector in advanced economies is too big, says IMFThe role of the financial sector in the US, Japan and other advancedeconomies has grown too big, the International Monetary Fund haswarned. They pointed to growing evidence that at a certain stagebanks and other financial institutions assume too big a share ineconomies and end up contributing more to financial instability thaneconomic growth.

The dollar fell to its lowest level in three months as weaker‐than‐expected U.S.retail sales reinforced the view that the Federal Reserve may hold off raisinginterest rates… The U.S. dollar index, which tracks the greenback against abasket of six major currencies, fell 1% after hitting a more than three‐month low.The gauge has now dropped some 6.5% from a 12‐year peak reached in March.Meanwhile, the euro strengthened to asmuch as $1.137 versus the dollar.

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The Market Roar…

Shanghai’s stock market suffered its worst fall in more thansix years on Monday with China’s biggest securitiesbrokerages hit by a crackdown on margin lending, anengine of the frenzied rise in mainland shares in recentmonths. The China Securities Regulatory Commissionsaid on Friday it had banned Citic Securities, HaitongSecurities and Guotai Junan Securities, the largestbrokerages by assets, from opening new margin tradingaccounts for three months, following investigations intohigh-risk margin trading.

Chinese shares look decidedly frothyEasier money means more leverage for punters, which means higher prices only as long as the froth lasts

China’s technology stock mania scaled new heightsyesterday when shares in a Shanghai-listed realestate company rose by the maximum 10 per centdaily limit after it changed its name to P2PFinancial Information Service Co. The company,formerly known as Shanghai Duolun Industry,acknowledged in filings that it had not starteddeveloping a peer-to-peer lending business.

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Households – Brave New World

US Sales of light vehicles declined 4.0% (+2.5% y/y)during April to 16.45 million units (annual rate) versus17.15 million in March. The latest level remained in therange staked out since the middle of last year. Autosales decreased 4.4% last month to 7.36 million andwere down 2.7% y/y. Imported car sales declined 8.8%to 2.06 million (-10.0% y/y) and were at the low end ofthe range in place since 2012. Domestic auto sales fell alesser 2.6% to 5.31 million (+0.5% y/y), remaining nearthe low end of the range of the last year. Light trucksales declined 3.8% (+7.1% y/y) to 9.09 million units.Domestic light truck sales decreased 4.6% to 7.86million (+5.2% y/y). Imported truck sales, however,increased 2.1% to 1.23 million (+21.2% y/y), reachingthe highest level since August 2009 when the "cash-for-clunkers" program fueled sales. Imports share of themarket for light vehicles slipped m/m to 20.0%, downversus a high of 30.7% in February 2009. Imports shareof the passenger car market fell to 27.9% after jumpingto 29.3% during March. Imports share of the light truckmarket rose sharply to 13.5%, the highest level sinceNovember 2013.

U.S. Economic Confidence Index Slipped Further …

U.S. nonfarm payroll employment during Aprilincreased 223,000 (2.2% y/y) following a reduced85,000 March rise, revised from 126,000.Improvement in services and construction employmentled last month's increase. The unemployment ratemoved in line with expectations, falling to 5.4%,the lowest level since May 2008. The overallunemployment rate, including marginally attachedand those working part‐time for economic reasons,slipped to a new low of 10.8%. Average hourlyearnings ticked 0.1% higher (2.2% y/y),disappointing expectations for a 0.2% rise.

Some believe that there are ‘eerieparallels’ between the student loan boomand subprime mortgages

U.S. Home-Price Growth Picks UpThe number of metropolitan areas that saw year-over-year double-digit percentage increases in home prices more than doubled during the first quarter.But affordability concerns could keep many would-be buyers out of the market.

Rising prices are putting more homes out of reach, and pickings are slimbecause few properties have come onto the market this spring, when sales aresupposed to take off. Millennials are also burdened by heavy school debt anddepleted savings that hurt their ability to qualify for a mortgage. Until theirincomes start to rise meaningfully, many will be forced to keep hunting for ahome while delaying the dream of ownership. This has weighed on overallhome sales and economic growth throughout the rebound in housing the pastthree years. If early signs are any indication, there won't a noticeable jump innew homeowners during the spring.

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Reference Points…

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Dislocation, Dislocation, Dislocation

Fed caution emboldens equity bulls

Beijing ponders real-economy conundrum

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May 14, 2015

The Likelihood of Unlikely Events

Scenario modelling Needs major rethinkForecasting failures over the past decade have accelerated methodological changes,moving away from point estimates towards a larger use of forecast ranges and alternativescenarios. More risk indicators have been added to forecasters' watch list, developingearly warning signals. Given estimates for key economic determinants, many othervariables' outcomes are predictable based on these key factors, thanks to the importanceof dominant drivers and the slow‐moving nature of some underlying trends. Forecastersare looking for better ways of predicting and assessing combinations of events that pushoutcomes beyond 'normal boundaries'.

The other element of difficulty is the lack of focus on micro or sectoral triggers for riskconsideration. Missing inadequacies in the housing and mortgage markets, in tech ortelecom, or in select emerging markets will often translate into missing the major turningpoints. Very few excel in this new world…

Local international considerations are also a major deficiency… For example, the Russiaeconomic downturn is aggravated by the difficulties in the budgets of regional and localauthorities. On March 30, four regional governments announced that they planned toissue bonds. The federal government was reported to be restructuring regions' debts tothe federal budget, with a long grace period and a refinancing rate of 0.1% at a time ofdouble‐digit inflation. On April 1, the federal government said it would be giving 16.9billion rubles in small‐business subsidies to the regional authorities and plans formortgage subsidies to halt the 30‐40% drop in the pace of construction in the regions.

Greece's long-drawn-out debt agony continues

Now we have questions regarding U.S. growth momentum !

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Engines of Growth…

China's Latin America funding brings calculated riskWhile Chinese investment in Latin America has grown rapidly overthe past decade, most financial flows are sovereign loans, mainlyto Argentina, Ecuador and Venezuela. Foreign direct investment(FDI), by contrast, remains comparatively small. In both cases,most financing has targeted natural resource sectors, raisingconcerns over excessive Chinese control. China's objectives arediverse, varying across sectors and countries, and increasinglyattuned to local political dynamics, as well as the risks inherent insome of its regional deals.

Brazil Manufacturing Activity Falls Most Since 2011Brazil's manufacturing activity contracted at the fastest rate in morethan three years in April amid reductions in output, new orders andbuying levels, survey data from Markit Economics revealed. TheHSBC Brazil Purchasing Managers' Index fell to a 43-month low of46 from 46.2 in March. A PMI reading below 50 suggests decline inactivity and the sector has now contracted for the third consecutivemonth. Production levels were reduced at the fastest pace sinceMarch 2009, due to weaker demand from both domestic and exportmarkets and output fell across al the three monitored categories.

Brazil's private sector activity fell at the fastest pace in more than sixyears during April, with weaker performance in both manufacturingand services sectors, survey results from Markit Economics showedWednesday. The headline seasonally adjusted HSBC BrazilComposite Output Index tumbled to 44.2 from 47 in March, markingits lowest reading since March 2009. A reading above 50 suggestscontraction in the private sector. The Purchasing Managers' Index(PMI) for the services sector plunged to a 72-month low of 44.6 inApril from 47.9 in March, amid declining new business and anincreasingly fragile economy.

China’s overall trade with the world dropped10.9 per cent in April from a year earlier in thelatest sign of the slowdown in what has beenthe world’s fastest-growing large economy fordecades. Chinese exports unexpectedlydropped 6.4 per cent last month year on year,while imports plummeted 16.2 per cent,according to customs data released

Eurozone retail sales declined in March for the first time in six monthsas both food and non-food product sales decreased from February.Retail sales volume dropped 0.8% (m/m) in March, reversing a 0.1%rise in February. This was the first decline since September and waslarger than the economists expected drop of 0.7%. On a yearly basis,growth in retail sales eased to 1.6% (y/y) from 2.8% in February. It wasalso slower than the 2.4% rise forecast by economists.

GAMING

ATLANTIC CITYOn May 13, 2015, the NJ DGE released April revenues, includinginternet gaming revenues. Atlantic City operators (including onlinegaming) generated revenues of $199.0 million (-15.6% versus $235.9million). These results were affected by the closure of Showboat(August 31, 2014), Revel (September 2, 2014), Trump Plaza (September16, 2014) along with the online offering of Trump Taj Mahal.

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Think it Through…

Saudi Arabia Is Burning Through Its Foreign Reserves at a Record Pace

Search for Yield Leads to More Risks in Credit Funds In current market conditions, fixed income fund managers may be tempted to overreach for yield, potentially loosening credit selectivity and leading to excessive credit and liquidity risk-taking.

Dollar trend to shape EM hard currency corporate debtRecent weakness in the dollar, which is currently trading at a two and halfmonth low against a basket of currencies, is contributing to the strongperformance of emerging market (EM) dollar-denominated corporatebonds, whose returns in the first four months of 2015 exceeded those onboth EM local currency and dollar-denominated government debt. Whileimproving sentiment is mainly due to the recent tightening in Brazilian andRussian corporate bond spreads, the marked deterioration in the creditquality of this asset class, in which Chinese property companies andRussian banks are the largest borrowers, poses significant risks given thefragility of market conditions.

Emerging market dollar denominated bonds have bucked the recent bond slump, encouraging investors to flock to the asset class.

Emerging market bond ETFs now manage a record $20.7bnBoth Markit iBoxx USD Emerging Market Sovereign and Corporate indexes have seen spreads tighten year to dateBut Turkish bonds have not seen the same improvements

Last month saw dollar denominated emerging marketcorporate and sovereign bonds post total returns of 1.2% and2.1% respectively, according to Markit iBoxx. Thisperformance defied the broader sell off seen at the end of lastmonth and puts dollar denominated emerging marketsovereign and corporate bonds 2% and 3.3% ahead of USgovernment bonds for the year to date.The two key factors behind this recent trend are oil pricestabilization, which has seen investors view bonds issued byoil dependent foreign issued bonds in a more favorable light,and the recent pullback in the dollar which had providedheadwinds for emergingmarket dollar borrowers.

Chinese regulators issued a guideline, withdetails of a previously announced debt‐swapplan, that says banks and local governments canuse municipal bonds as collateral for borrowingfrom the central bank, which could boost afledgling municipal market. China launched itsmunicipal bond market last September in thehope that by forcing provincial governments toraise funds only through bond issues, financialmarkets would enforce budget discipline on thegovernments and limit their borrowing, whichhas ballooned in recent years to an estimated$3 trillion. In an effort to limit debtservicing costs for municipalities, Chinas’finance ministry in March revealed a plan thatlocal governments would be allowed to swap 1trillion yuan ($160 billion) worth of high‐interest local debt maturing this year for newmunicipal bonds.

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Credit Matters-Know RiskMany Excel in Strategy, Few in the Management of Risk

Japan Downgraded to 'A'The downgrade reflects the fact that the Japanese government did notinclude sufficient structural fiscal measures in its budget for the fiscalyear 2015 to replace a deferred consumption tax increase.

Puerto Rican shutdown would increase default fearsThe Congress of Puerto Rico rejected Governor Alejandro GarciaPadilla's proposal to introduce a value-added tax (VAT) on April30. Puerto Rico is facing a severe fiscal crunch; its generalobligation bonds are rated junk status and the government has saidthat a 2.9 billion dollar bond issuance -- at risk because of thecongressional vote -- is required to prevent a shutdown in the nextthree months.

The torrent of bond offerings backing aggressivecorporate fiscal policies resulted in a rare weeklyissuance total north of $50 billion, against the backdropof rapidly increasing absolute costs, LCD data show.Indeed, that $50-billion threshold has only been crossedtwice before, including when $60 billion was printed overthe week ended Sept. 13, 2013 – largely on the strengthof a record-smashing, $49 billion deal for VerizonCommunications – and $51.7 billion was placed over thefirst week of March this year.

Chinese stocks suffered their biggest three-day drop sinceJune 2013 on Thursday, hit by concerns about excessivelyhigh valuations and prospects of a regulatory crackdown onmargin trading. The benchmark Shanghai Composite Indexslid 2.8%, extending this week’s losses to 8.2%. Sincereaching a 7-year high on April 28, the Chinese stock gaugehas retreated 9%, prompting worries that the world’s bestperforming stock is heading for a significant correction.

Hedge funds dig deep for greater returnsManagers are looking at more esotericinvestments for yield

Puerto Rico faces battle to avoid defaultUS territory seeks deal with hedge fund creditors

Fitch Ratings warns of the temptation that fixed income fund managers mayhave in current market conditions to overreach for yield, potentially looseningcredit selectivity and leading to excessive credit and liquidity risk-taking. Fundmanagers may be tempted to look for opportunities in lower-rated, less liquid,off-benchmark or longer-maturity bonds. This can lead to excessive risk-taking- there is a growing consensus among asset managers that the risks arebeginning to outweigh the rewards, due to an overall increase in liquidity, re-pricing and idiosyncratic risk. The inability to maintain discipline in creditselection and liquidity risk management, or the inability to de-risk the portfolioin a timely manner may put pressure on some fixed income Fund QualityRatings. Furthermore, a potential change in market regime or market re-pricing(exacerbated by poor liquidity) may lead to more differentiation between funds'performance, which in turn could lead to select rating actions.

The reach for yield in longer-dated bonds puts investors in peril as the market goes into reverseWith interest rates so low, governments and companies have beenissuing bonds offering ultralow coupons. That increases duration andmakes those bonds riskier. So investors will be particularly vulnerable ifand when central banks start raising rates back toward more normallevels. The euphoria around quantitative easing initially pushed bondprices into the stratosphere. The trip back down to earth when centralbanks no longer have their foot on the accelerator is going to be painful.

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A New Geography of Business

Activity in the Canada's manufacturingsector shrank in April for the third monthin a row as the new orders measure fell toits lowest level on record amid weakerdemand in the energy sector, data showedon Friday. The RBC CanadianManufacturing Purchasing Managers'index (PMI), a measure of manufacturingbusiness conditions, was nearly unchangedat a seasonally adjusted 49.0 last monthfrom 48.9 in March. That is well belowthe average of 53.1 the survey has seensince it began in late 2010. The index hasbeen below the 50 mark that indicates adeterioration in business conditions sinceFebruary. The new orders gauge fell to47.5 from 48.4 with manufacturerspointing to weaker demand from energyclients. The Canadian economy is feelingthe effect of the drop in the price of oil, amajor export, and is expected to see nogrowth in the first quarter.

South Africa Manufacturing Sector Contracts FurtherSouth Africa's manufacturing sectorcontracted for the third straight month inApril, at a faster pace, survey figures fromKagiso Tiso Holdings showed

India's manufacturing economy logged a growthslowdown in April, survey data from Markit Economicsshowed. The headline HSBC manufacturing PurchasingManagers' Index fell to 51.3 in April from 52.1 in March.Nonetheless, the index stayed above 50 threshold for theeighteenth successive month. Production has increased forone-and-a-half years, although the pace of expansion easedin April. This was mainly caused by softer increase in orderbook volumes. New order volumes continued to rise inApril, marking an 18-month expansionary sequence.However, the rate of growth moderated since March.

Taiwan's exports declined at thefastest pace in more than twoyears in April, figures from theMinistry of Finance showed…Exports plunged 11.7% (y/y) inApril, faster than March's 8.9%decrease. The latest rate ofdecline was the sharpest sinceFebruary 2013 and was led bydeclines in the exports ofelectronic products, basic metalsand articles, and chemicals.Imports tumbled 22.1% in April,following a 17.8% fall in March.The visible trade surplus came inat $4.76 billion in April,following the $4.07 billionsurplus in March.

Property prices and household debt inAustralia's biggest city are at recordlevels and young professionals are findingit tough to get on the property ladder.Meanwhile, overseas investors — mostlyfrom China — are investing heavily.

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May 14, 2015

Pumping Iron…The Old Economy Revisited

Maersk Completing Order of 10 Container MegashipsWorld’s biggest container-shipping operator expects deliveries to start in 2017

The cost of shipping a container from Asia to Europe, theworld’s biggest seaborne trade route, jumped 151% thisweek to $861 after 13 straight weeks of declines,according to the Shanghai Containerized Freight Index,which tracks freight rates. But Mr. Roach said the increasewas the result of delayed general rate increases by allshipping lines, and prices are expected to fall over the nextseveral weeks. The weekly average freight cost for thefirst four months of 2015 stands at $797 a container,compared with $1,168 in the same period last year.Operators have said prices below $1,300 over the long runare unsustainable.

Volvo Car Corp to Build Plant in Berkeley County, SCThe $500 million assembly plant will have close access to critical shipping ports

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The DNA of BusinessReconfiguring Industries to Define Growth

Tesla spurs stored power revolutionMusk makes big bet on domestic uses Falling battery prices open new possibilities

Can Tesla's battery hit $1 billion faster than the iPhone?The reservations reported in the first week are valued at roughly $800million, according to numbers crunched by Bloomberg. If Tesla convertseven a fraction of those reservations into actual sales, the battery roll-outcould measure up as one of the biggest ever for a new product category.

Two Retail Veterans Take Aim at Amazon's E-Commerce Reign The start-ups Enjoy and Jet. com are hoping to knock

Amazon off its perch as the leader of online shopping.

China’s Smartphone Market Slows DownWith many Chinese already owning a smartphone, handset makers look to win over ‘upgraders’

Verizon to Buy AOL for $4.4 BillionVerizon is buying AOL for $4.4 billion in cash, a deal aimed at advancing the telecom giant’s growth ambitions in mobile video and advertising.

Ahold, Delhaize in Merger TalksDutch food retailer Ahold and Belgium’s Delhaize said they arein talks about a possible near-$26 billion merger that couldcreate one of the largest supermarket operators in the U.S.

When Steve Jobs released the first iPhone in June 2007, Apple Inc. andVerizon Communications Inc. were worth almost exactly the same in thepublic markets: About $115 billion. What came over the next eight yearswas one of the greatest transfers of power and wealth in corporatehistory. Mobile phone operators—who had been brutish, intractablegatekeepers to the customer—were turned into Apple’s lackeys. Thecustomer was still spending money with the carriers, but now she wasspending far more with Apple. Today Apple is worth about $735 billion,nearly double that of Verizon and AT&T Inc. combined. The carriers stilllove to romance the “power of the network,” but this has the feel of acrumbling empire, vainly proclaiming its domain over places long overrun.Affter more than 75 years of flying, the end is near for US

Airways. American Airlines plans to shut down thevenerable carrier over a 90-day stretch that could begin assoon as July, which would mean a final departure aroundOctober. American executives designed the gradual fade-outto avoid the kind of technological glitches and massive flightdelays that plagued United Airlines after it abruptly switchedto Continental's computer systems in 2012.

Wegmans Food Markets Inc., the supermarket chainthat's ranked No. 1 by Consumer Reports, is openingits first location in New York City with a store inBrooklyn. The new store will anchor a $140 millionredevelopment of Brooklyn Yard's Admiral's Rowthat's being led by Steiner NYC, according to astatement Wednesday. Wegmans plans to hire 450 to600 people for the market. Wegmans, founded in1916, has expanded slowly along the East Coast. TheRochester, N.Y.‐based company is often compared toTrader Joe's for its fervent customer base andemployee benefits, and Consumer Reports gave thechain its highest rating in its latest survey. Thecompany focuses on hiring and training goodemployees, which improves the shopping experience,said David Livingston, a supermarket research analystwho runs DJL Research.

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Real Estate and Construction Outlook

In Midtown, tenants within the city’s FIRE sector fueled a significant rise in activity during the first quarter.Despite strong leasing activity in the first quarter of the year, vacancyrates increased throughout Manhattan, according to a new report byJLL. The city witnessed negative absorption for the first time sincethe first quarter of 2014 as a number of large blocks of space wereput back on the market. Manhattan’s overall vacancy rate rose to10% this quarter, an increase of 5.3% from 9.5% at year-end 2014.New York’s Class A vacancy rate rose to 11% in the first quarter of2015, an increase of 4.8% from 10.5% the previous quarter.

US Construction SpendingMomentum in the building sector hasweakened significantly. The value ofconstruction put-in-place slipped 0.6%during March following no change inFebruary, revised from -0.1%. Year-to-year growth of 2.0% follows gains ofroughly 6.0% during 2013 and 2014. Thegrowth slowdown in private constructionactivity has been pronounced. Buildingeased 0.3% in March following a 0.3%rise. The y/y gain of 2.9% is down from8.0% last year. Residential buildingactivity declined 1.6% following littlechange in February. Negative y/ygrowth of 2.6% compares to a 5.1% riselast year and a 20.4% 2013 increase.Single-family building activity fell 1.8%(+7.8% y/y) after a 1.1% decline. Annualgrowth had been 10-30%. Multi-familybuilding dropped 2.1% (+23.4% y/y),the first fall since July. The y/y gain of23.4%, though still firm, is down from aone-third increase in 2014. Spending onimprovements declined 1.0% and wasdown by one-quarter versus last year.

A Pandemic of PenthousesAttempts to foment a bidding war may backfire. A recent Redfinreport looks at the proliferation of listings in excess of $1 million in conjunction with a softening of sales prices and notes that sellers may have been overpricing their properties in expectation of multiple bidders.

Deal Takes Shape for ‘Mansion Tax’ to Move Forward (NY)

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More Construction…

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Will Life Ever Be the Same?

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